Business context and reporting period
CaliberCos Inc. (Nasdaq: CWD) filed this Form 10-K for the fiscal year ended December 31, 2023; it is an annual report, not a standalone fourth-quarter report. Caliber is an alternative asset manager focused primarily on middle-market real estate, private equity and debt investments, with operations in Alaska, Arizona, Colorado and Texas. It reports more than $3.1 billion in assets under management and assets under development (AUM/AUD); its own fair-value AUM was approximately $741.2 million at year-end.
During the fourth quarter, management changed its segment assessment and concluded that the company operates as one segment. Consolidated results include investment funds and other variable-interest entities (VIEs), as well as noncontrolling interests; therefore, consolidated revenue and expenses include substantial fund-level activity that is not equivalent to the parent company’s standalone operations.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Consolidated revenue | $90.9 million | $84.0 million | +8.3% |
| Asset management revenue | $10.6 million | $15.3 million | -31.1% |
| Performance allocations | $3.6 million | $2.5 million | +43.1% |
| Total expenses | $119.5 million | $92.4 million | +29.3% |
| Net income (loss) | $(27.6) million | $14.0 million | Declined $41.5 million |
| Net income (loss) attributable to CaliberCos | $(12.7) million | $2.0 million | Declined $14.7 million |
| Basic and diluted EPS | $(0.63) | $0.11 | — |
| Net cash used in operating activities | $(18.7) million | $(7.4) million | Use increased $11.3 million |
| Net cash used in investing activities | $(5.4) million | $(31.8) million | Use decreased $26.4 million |
| Net cash provided by financing activities | $25.8 million | $38.6 million | Down $12.8 million |
Consolidated revenue growth was driven mainly by hospitality operations, including increased occupancy and average daily rates and the addition of Hilton Tucson East. Total expenses rose faster than revenue, reflecting higher hotel labor and operating costs, Hilton Tucson East expenses, increased company payroll and stock compensation. The 2023 real-estate sale gain was $5.0 million, compared with $21.5 million in 2022. Interest expense increased to $4.7 million from $1.1 million.
On an unconsolidated basis intended to show the asset-management platform without consolidated funds and noncontrolling interests, revenue fell 14.4% to $20.6 million and net loss was $11.8 million, versus net income of $2.3 million in 2022. Fund set-up fees declined sharply to $0.5 million from $6.2 million; management fees and development/construction fees increased, while brokerage and financing fees declined. Management’s non-GAAP Fee-Related Earnings were a loss of $8.9 million and Distributable Earnings were a loss of $9.7 million, compared with positive $0.8 million and $2.5 million, respectively, in 2022. These measures are not substitutes for GAAP results.
At December 31, 2023, consolidated assets were $299.4 million, liabilities $233.4 million and total equity $66.0 million. These totals include consolidated funds. The balance sheet showed company cash of $0.9 million and restricted cash of $2.6 million, plus consolidated-fund cash of $2.9 million and restricted cash of $11.3 million. Cash and restricted cash combined were $17.6 million. The company’s cash available for general corporate purposes is distinct from fund assets, which generally cannot be used for corporate obligations.
Company notes payable were $53.8 million net of deferred financing costs, including $36.4 million of corporate notes and $16.3 million of real-estate and other loans. The filing separately reports $37.8 million of unsecured corporate promissory notes outstanding, with an average weighted interest rate of 11.42%; the difference from the $36.4 million corporate-note figure is not clearly reconciled in the text. Consolidated-fund notes payable were $129.7 million net. Most company corporate-note maturities fell within the 12 months after the financial statements were issued, and the company said it did not have sufficient cash on hand to repay them.
Management disclosed that operating losses, negative operating cash flows and near-term debt maturities raised substantial doubt about the company’s ability to continue as a going concern. It said it had extended $12.3 million of corporate notes for 13 months by the financial-statement issuance date and considered its broader plans probable of alleviating that doubt. The company also reported a debt-service-coverage covenant shortfall on its headquarters loan; certain consolidated-fund loans had liquidity or debt-service covenant issues, while some were subsequently brought into compliance or extended.
Material changes, outlook and risks
- Managed capital increased to $437.6 million from $383.2 million, while fair-value AUM edged down to $741.2 million from $745.5 million, primarily due to asset sales, partly offset by acquisitions and appreciation.
- Management described fundraising and capital deployment as sensitive to investor demand, fund performance, interest rates and credit availability. It cited inflation, higher borrowing costs, volatile markets and geopolitical uncertainty as business headwinds, while expressing confidence in sourcing opportunities and expecting its model to benefit from a potential shift toward a buyer’s market. These are expectations, not guaranteed outcomes.
- The company had no quarterly or annual earnings guidance. Its stated growth plans include expanding distribution channels, developing new funds and platforms, growing its investor base and evaluating acquisitions.
- Development exposure is substantial: the company reported 2,986 multifamily units, 2,386 single-family units and significant commercial, industrial, office and retail space under development. Estimated total project costs were $2.3 billion if completed, requiring multiple potential funding sources; Caliber is not obligated to complete the projects, and financing or approvals may not be available.
- Key risks include the ability to refinance or extend debt, raise fund capital, realize investment proceeds and collect affiliate receivables; interest-rate and construction-cost exposure; illiquid real-estate valuations; loan guarantees; regulatory, litigation and cybersecurity risks; and dependence on key personnel. Fair-value estimates for illiquid assets rely on management assumptions.
- Caliber reported potential obligations to contribute funds to two opportunity-zone funds if investor returns fall short of a 6% IRR; management estimated both funds’ fair values below that threshold at year-end. The filing also describes guarantees and other commitments, but does not provide one aggregate maximum exposure across them.
- After year-end, a hospitality subsidiary closed on the first of nine hotels under a contribution agreement for $28.6 million and obtained a $14.1 million loan; Caliber Hospitality, LP issued $9.6 million of operating-partnership units as part of the settlement. The board also approved $25 million to $35 million of corporate notes to repay maturing notes.
Most important facts for investors to verify
- Current status and terms of the remaining corporate-note maturities, including extensions, refinancing, repayment capacity and the difference between the $36.4 million and $37.8 million corporate-note disclosures.
- Whether management’s going-concern mitigation plans are being realized, especially fundraising, cost reductions, collections from affiliates and access to new financing.
- Liquidity and covenant status for corporate and fund-level loans, including the 18% Four Points loan and other extended or past-maturity borrowings.
- Whether development projects can obtain required approvals and financing, and how changes in costs, schedules or project mix affect expected fee income and fund returns.
- Fundraising, deployment and realization trends, including whether recurring management and development fees can offset lower set-up and brokerage activity and volatile performance allocations.
- Exposure to related parties, guarantees, the two 6% IRR fund commitments, and the extent to which consolidated-fund assets and cash are unavailable to satisfy parent-company obligations.